Nifty Pre-Market View.

Nifty's correction seems to have ended at MEma with
a move above 21 Hr sma; DLEma & 5 DSma after
positive divergences in the hour charts as well as the break-out of Falling wedge.
More confirmation needed in its follow up action today to scale and hold
5DEma;  J10SAR; JNSAR & DHEma.
There will be corrective pull backs for the segments of the upmove as well as for the entire upmove. Watching the market correcting within the normal retracement levels gives you confidence that the market is treading the normal path, not deviating from the reversal.
First resistances would be at previous lows @ 5258-66-73.(Coincides with DHEma-WHEma)
5267-5300 is the Gap zone clearing which more upsides while failure would cause doubts and breaking 61.8% of the upmove at any point should caution the bulls & embolden the bears.

Nifty bounces off an intra double bottom after Hour +ve div.

Once again a global cues-play unfolded as envisaged in the morning with both A & B scenarios having a bounce potential. Oversold Hour TA took advantage of a negative global cue to bounce off the lows. After the initial bounce, the original trend asserted itself by bringing Nifty down again but could not break the lows. OI showed PUTS writing since morning which supported Nifty at the double bottom. EOD OI would give a clearer view.

This intra rally has not altered the technical set up. Only a follow up rally would do that.

1. JustNifty TA(14th Dec)

2. BankNifty TA(14th Dec)

Nifty lifts off from "Oversold" levels with +ve div.

Earlier support of "5935 & 5965" played supports again during intraday action.
Earlier resistances of 6038/6074 may act as one for tomorrow.

When you sense bullishness from "Oversold readings as well as the display of positive divergences", use the move above "Low ema" to reverse your trades or initiate new ones.

When you sense bearishness from "Overbought readings as well as the display of negative divergences", use the move below "High ema" to reverse your trades or initiate new ones.

Inspite of a move above HLEma on Friday, Nifty broke down once breaking 5960 but persisting +ve divergences ensured the second attempt bore desired results.

Weekly pivot-5961 & Daily Pivot-5978 should hold to carry this move further up.

Nifty Premarket View

Dear SN,
Let me state this to you.
Monthly TA is neutral and on the verge of turning up again.
Weekly TA is in uptrend, though a bit Overbought.
Daily TA has shown its tendency to stay UP with shallow corrections and it has not closed below "Day low ema" for more than 30-35 days.

Using oscillators to trade works well in a sideways market like I have shown with 9-rsi chart in yesterday's EOD post. In a trending market, you use them to spot divergences alone. Even the divergences do not give much gains if it is in a "3rd wave".

There were many +ve divergences in stocks and I posted nearly 14 stocks in my "Stockwealth" blog and all of them have given quite a lot of returns in short term. Evren the -ve divergence stocks such as Infosys, India cement have fallen.

It is not difficult to spot these divergences. But view the overall market and when you see many such divergences, then your confidence and conviction levels will be high to take a trade in them.

With regard to the chart(Shown below) that you have put up, a divergence that takes 6 months & more may be viewed as a running correction or a 3rd wave in progress. Since that is a day chart, I would prefer a divergence that takes 10 to 15 days to develop (+/-5) for trading purposes and anything more than that loses its relevance..

I hope this clear your doubts. More exposure to the market alone can guide us better as markets keep evolving and we need to learn constantly.

Applying Divergences & ORB with Hour time frame.

Satheesh's quest for knowledge should lead to some profitable trades....only with some patience and persistence..The trick will be to to take a step back and see the bigger picture. That is to see a daily chart and fit in the "hour" chart into it.
1. I credit lots of success to "EW study" but never in isolation. The success rate is good only because it is combined with TA.
2. "Divergences play" alone bring you the biggest riches time and again. The more pronounced they are, the more gains they get you. And when these divergences coincide with a "perceived completion of EW ", the conviction level in a trader goes high to hold on to that trade.
The two lows 4766(3rd wave) and 4675(5th wave) coincided with a clearly pronounced positive divergence and the result has been extraordinary.
Subsequent to that we have had one -ve div but that happened just after a steep rise and the oscillators showed -ve div but it is to "time adjust" the steepness in prices.
Currently a negative div. is developing but there is some "doubts" in the EW count. The strength in bank Nifty & certain stocks may cushion any falls. This one would test one's patience and one should remember the main trend and its trending up within the channel.
3. Macd defines the "Moving average convergence and divergence". One of the potent steep move indications has often come from watching the short term moving averge converging towards a medium term average (Here we have taken 35hour/ 5-day & 70 Hour/10-day sma) and then start to turn away slowly without touching or just touching the medium term average and thus setting up a "fast rise" scenario.This set up often concludes the "corrective or sideways" scenario and commencement of the next up move.
4. For the trend followers, a continuation of Higher high(HH) and Higher Low (HL) will indicate the continuation of trend and they can simple hold on to their position till this set up changes to LH & LL.

I have put up nearly 14 "Stock Charts" in my "Stockwealth Blog" with divergence factor figuring prominently. Exchange your observations by either sending a chart or name of the stock by emailing to me and I will try to put it up for every one's benefit. It is not possible to monitor so many stocks daily consistently.
"Piyush Sharda" asked about "ORB" and selecting the correct day to use it.
I wish there is a simple answer to this. If one has understood the above lesson well, use of "ORB" too could be applied selectively.
Whenever you see an extreme reading in the indicators, use the ORB. It will work bothways meaning if the extreme reading is at the top in an up trending market, you get a corrective move down and ORB will guide you. Similarly when the reading is at the bottom, then the possibility of the correction terminating and the uptrend resuming and ORB will confirm that.
Even if one follows it consistently, the overall results will be very good after deducting the stop losses.

Nifty reverses with a positive divergence.

A close above the 5 day ema will propel it towards the 5000+ zone. Real buying will emerge when we see a positive divergence in the daily which has not happened yet. If it is a 4th wave up, it will break the channel and then resume the down move in the next few days. 4th wave offers big trading opportunities. Nifty is in the "Untraded zone" of 4750-5000.

The channel break gave a confirmation of a reversal after a positive divergence as well as a "5 wave" move from 5293 to 4766.

I have included the monthly Pivots too now. Will fine tune the averages. Closing above the "Hour Low ema" was the first indication of the end of down move in "Hourly time scale".Closing above the "Hour High ema" was the next step along with the break of the channel. And finally closed above "Daily Low ema" which could result in a rally towards "Day High ema".

Divergence Trade..(Most Potent)

When divergences between price and momentum indicators (roc, rsi & macd)arise, it can lead to some very profitable, high probability trades.
These set-ups are counter trend tactics, and as such, one must employ a hard stop in the event that the trend reasserts itself and you are on the wrong side. Contrast this tactic with the principle: “Trends have a higher probability of continuation than reversal.”
When you play for a momentum divergence trade, you are always playing for a target closer to the price the divergences commenced and playing for a possible shift in buying/selling pressure. Before attempting any such trade, I suggest researching further on this potentially profitable topic.

Some of the most popular Oscillators/indicators for uncovering price divergences include the MACD, stochastic, RSI, Ultimate Oscillator, rate of change, etc. You have to discover which indicator works best for you. Indicators are used as ‘training wheels’ until you can develop an intuitive sense of determining where the buying and selling pressure (momentum of the move) are diverging with the price action. This process takes time, yet indicators can help highlight these conditions. There is no perfect indicator to do this. I am using a fast MACD oscillator in my chart example. You can also spot divergences in other momentum oscillators.
Momentum precedes price in that a slowing of momentum indicates that a possible change in price is yet to come. Do not get caught in the trap of searching for momentum divergences all over the chart. Examine them at the (possible) end of mature trends for greater probability. Again, we are not seeking the end of a trend move (reversal), but just a retest and a small target. In fact, we are playing for a simple retracement swing against the direction of the prevailing trend. This illustration may help:
We are in a mature uptrend and price is continuing higher. A situation develops where the buyers are becoming less aggressive in their momentum (force of buying pressure) and momentum is declining while price is not.
Of importance to note (and the reason behind the divergence in the oscillator) is also price based. Note the steep rise of the previous swing up (creating heightened oscillator/indicator readings) and then the more gradual rise of the second swing up (creating a lower peak in the mathematical oscillator). This sets up the divergence while the reason for it is declining momentum.
If momentum precedes price, then in this case, a decline in momentum forecasts a decline in price as the most probable swing play. If buyers are less aggressive to raise their offers, then it won’t take much effort for price to fall and those who own the stock will begin to sell.
This chart highlights momentum divergences finally reversing the trend:
Divergences are difficult to quantify for a mechanical system, so this is one area discretionary traders may have an edge over programmers.
I did want to highlight another point through the use of various time-frames. Divergences and momentum concepts are valid across all time frames.
There are a few factors to be aware of when identifying momentum divergence plays:
• Momentum divergences are invalidated (and nonexistent) in range bound, consolidating markets
• Only look for momentum divergences in the context of a mature trend (however short the time-frame)
• Momentum divergences work best after a “three-impulse” pattern in a trend( That is two impulse moves followed with a consolidation/pause/sideays move with a final impulse move)
• Momentum divergences are to be played for a target (price correction) commensurate with the time cycle it is noticed and NOT in the higher time cycle.
• The best divergences resemble “double-top” or “double-bottom” chart patterns.
• Keep a stop in the market close to the last pivot point in the event that the strong trend reasserts itself and causes great losses.
• Exit divergence trades which do not resolve within a time parameter.
. Trading momentum divergences is a complex strategy and should only be attempted after repeated exposure and internalization of the price behavior that sets up the pattern.

How to combine EW with macd

RENU asked about reading EW with macd:

Illustrated here with "IOC" & "Nifty" chart:-
(I have chosen IOC as it is not manipulated, nevertheless widely traded in its sector)
1. When the down trend is nearing its "oversold" &" public apathy" & "Panic" situation, you will notice a +ve div in the down move's 4th & 5th wave down OR in "b" & "c" down OR in "c4" & "c5", there by identifying the start of the 1 st wave.
2. First wave generally gets exhausted with the macd moving into +ve area and this can be fine tuned with the help of hour charts. In underperformers, macd may find it difficult to get into positive territory but moves closer to "0".
3. In the Second wave, macd moves back into negative once again. In outperformers, macd may stay above "0" but moves down closer to "0".
4. Third wave upmove takes macd strongly up to the extreme upsides. Then. in outperformers the macd may move down with prices continuing to move up and as the macd moves up again, prices move much higher. This is where the "novice" investors/ traders read the direction of the macd with prices quite literally and miss a huge upmove..Exhaustion in this uptrend can be gauged from the "gaps", "volume" as well as following the 3rd wave subdivisions in the "hourly charts".
5. Fourth wave moves become triangles to carry out time correction if the third wave was very steep and swift Or an alternation to the second wave(if 2nd is flat, then the 4th is zigzag and vice versa). In underperformers, the macd moves into negative while in outperformers it stays above "0" but comes well off its high reading to set itself for a negative divergence base.
6. Fifth wave or the "froth" or the "speculative move" will bring in mostly the retailers with a herd kind of move to new highs while the macd making a lower high thereby developing a negative divergence. In a strongly trending markets, the 5th wave gets extended with series of negative divergences frustrating the bears and confounding the bulls and the falls happen with a sudden reversal when complacency sets into bulls.
7. During the reversal, the first wave down takes the macd into negative territory and the second wave up into positive and the cycle repeats itself in the opposite direction.

Sounds simple..But as you watch the prices move on your monitor, you generally tend to forget all your lessons. Best EW practioners have "military discipline" in them..those who mean business ...be it in any phase/ aspect of life.
When a trading competition was held in the USA for EW practitioners, most of the toppers had military background which gave them the edge over others in carrying out the commands without questioning.
All the EW followers will admit that the most difficult part of EW practice is "to believe in what one sees" . Correct labeling of the charts once the moves are over for posterity is easy . Needless to say here that "you are right only when you make money" and that is "act when you should without questioning".

Look how the stocks are Overdone..!!

Making money in the market is buying low & selling high OR selling high & buying low in Bull & Bear markets irrespective of whether you understand the fundamentals or know what the Economy is doing.
Economic indicators lag more than a year and by then the prices would have plummeted.

I have just shown some stocks that are overdone in the Sellingside which may offer some compelling returns in the short term.

As the Nifty is trading in a range of 2600 -2830, a break above may attract serious short covering & some buying interest.Break below may witness some selling..

There are positive divergences all around and there were good volume backed buying in stocks last week and the fall from Fri high was a kind of corrective fall only.

Markets may not move up vertically like in a bull market. But they have started to rally good on every dips..So use those weaknesses(Patiently) to buy into some oversold, quality stocks for short term gains..

So many bad news., depressive indicators but markets are shrugging off all that which is a sign of bottoming (How long..we will come to that when we see a overbought readings..)

You want to be a bear...Fine, then short after a rally or when you see a overbought readings, etc..
You are a bull..then buy into falls and book out into rises till 2860 is broken on the upsides, then buy more and book out into overbought readings or euphoric rantings by the media..

Happy investing/ Trading and good hunting..

These are some sample charts picked randomly for patterns & price behaviour & +ve divergence display only. Do your own searching and take a call.I am not a stock picker..I tradeinniftyonly...